The Nike story

What drives the business

• Nike relies on contract manufacturers for its athletic footwear and apparel, with nearly all production outside the United States and most products purchased by customers outside the United States.
• After years of pulling back from wholesale accounts, Nike has returned to that channel, which generated $27.5 billion in fiscal 2026 revenue, up 6 percent, while NIKE Direct generated $17.7 billion, down 6 percent.
• The NIKE Brand accounted for $45.2 billion of fiscal 2026 revenue of $46.4 billion, including Jordan Brand revenue of $7,034 million.
• North America growth partly offset weakness in Greater China and Europe, the Middle East and Africa in the quarter to May 2026, while NIKE Brand Digital revenue declined 12 percent.
• Nike's December 2025 leadership changes brought geographic leaders directly under the chief executive and combined technology with supply chain and manufacturing oversight to support its sport-focused strategy.

What the price assumes

At $36.39, the reverse DCF implies that free cash flow after stock pay grows 14.3% a year for ten years, using a 10.2% discount rate.

Nike delivered 2.8% annual growth on that measure over the last 10 years, while the TenQ check sets a 3.4% bar by moving that record halfway toward 4%.

The implied pace exceeds both benchmarks, alongside revenue growth of 0.2% and free cash flow of $2.2 billion over the last twelve months.

Value NKE on your own assumptions

What could change the story

• The 890 basis point gross margin increase in the quarter to May 2026 included approximately 900 basis points from expected IEEPA tariff recoveries, so the reported improvement does not establish an underlying margin recovery.
• Inventory remained at $7.5 billion at the end of May 2026 despite an increase in units, leaving demand and product mix important to clearing stock without pressure on profitability.
• Converse revenue declined 32 percent in the quarter to May 2026 and 31 percent in fiscal 2026 across all territories, adding another source of weakness alongside direct revenue.
• Fiscal 2026 shareholder distributions of approximately $2.5 billion exceeded free cash flow of $2.2 billion over the last twelve months, while stock pay of $715 million further reduces cash flow after compensation.
• Dependence on overseas factories exposes Nike to trade restrictions, tariff changes and shipment delays, and replacing specialized manufacturers can take time and add costs.

What to watch next

• Nike's June 2026 release contained no numerical forward guidance, leaving subsequent outlook statements important for assessing the pace of its operating changes.
• The next channel results will show whether wholesale growth persists and whether declines in digital revenue and Nike-owned stores ease.
• Gross margin excluding tariff recovery effects, further cash receipts from those recoveries and inventory units will help distinguish operating progress from accounting benefits.
• Free cash flow relative to dividends and stock pay will show whether shareholder distributions become better supported by internally generated cash.

Sources

• Nike's earnings release, filed with the SEC
• Its latest 10-Q or 10-K, for the risk factors
• The NKE stock report, for every figure and check